Lorenda Simms
Sutton Group - West Coast Realty
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Will the Desire for Larger Homes Be a Permanent Change?

With extended lockdowns, schools and offices shuttered, as well as many of our favourite amenities closed for long stretches due to the COVID-19 pandemic, Canadians have been spending a lot more time at home this past year. This has caused some buyers to reevaluate what they’re looking for in a home, including a desire for additional living space, whether it was in search of a dedicated home workspace or simply a larger backyard.


As provinces and territories continue to roll out vaccines and reopening plans move forward, it’s worth considering if the desire and demand for larger homes will persist as the pandemic recedes, and how the need for roomier residences has impacted markets across the country.


Today, we speak with Keith Stewart, Economist with the Real Estate Board of Greater Vancouver’s economist, and Shaun Cathcart, Director and Senior Economist, Housing Data and Market Analysis at the Canadian Real Estate Association (CREA), who share their thoughts on the future of this trend. 



Why did people start buying larger homes in the first place?


Buyers during the COVID-19 pandemic have gone out hunting for bigger homes for a few reasons, including millennials who are starting families to form households of their own, changing home feature needs, and a boost in spending power for some families.


At a basic level, our homes have become much more than a place to eat and sleep since the first round of pandemic-induced lockdowns. Instead, where we live has evolved into a classroom, gym, conference room and all sources of entertainment. By upgrading to a bigger home, buyers are able to gain greater square footage to accommodate more of their needs.


“More space enables you to have those additional functionalities in your space,” explained Cathcart. “Of course, that’s where you have a lot of extra money rattling around to make home everything when so many other things people spend money on, we weren’t doing.” 


Since the Bank of Canada made its first round of cuts to its mortgage rate-influencing overnight rate in early March 2020, mortgage rates have been hovering around all-time lows. Stewart says plunging interest rates have been a catalyst for some people to jump on an opportunity to make a purchase. This also coincides with a bulge in the late-twenties to early-thirties millennial demographic, who are now entering family-rearing years and setting their sights on suburban markets.


“That’s been the backdrop behind COVID, and I think what you’ve really seen is some shifting in preferences and some untethering of people’s work, and I really point back to those plunging interest rates,” said Stewart. “They’ve really brought these moves people were going to do or contemplated [and] concentrated [them] into a very particular point in time. That’s why we see this record sales activity nationally.”



How does the demand for larger homes affect the market?


Competitive market conditions have persisted long after the first wave of lockdowns in spring 2020, which has influenced supply and demand for homes with a larger square footage.


Cathcart explains many communities were already in seller’s market territory prior to the pandemic. Since March 2020 however, more buyers entered the picture and were clamoring for the comparatively smaller number of listings that were available, leading to multiple offer scenarios on larger homes, he said. With the supply of homes already imbalanced compared to demand, CREA reported in its most recent national housing update that the number of newly listed homes dropped by 6.4% from April to May.


The desire for larger living spaces may have also played a role in fueling higher demand and prices in recreational and suburban areas over the last year. Commonly referred to as the Urban Exodus, the pandemic saw an accelerated trend of city dwellers with the ability to work remotely relocating to rural or suburban communities, locations that would typically offer more house for less money.


For instance, average sale prices for homes in some recreational markets are expected to see annual increases in the 20% to 40% range, according to research published in the 2021 RE/MAX Recreational Property Report.



What home trends will we see in the near future?


With the end of the pandemic on the horizon, the home buying frenzy looks to be slowly cooling off.


“A lot of the frenzy we’ve seen in the last year has seen people looking to find a place to ride out this pandemic in, and so you’d expect some of that urgency is going to fade at this point because we’re sort of near the finish line,” said Cathcart.


In June, CREA reported a 7.4% monthly decline in home sales from April to May. This can be attributed to freshly implemented lockdowns, high home prices, buyer fatigue, and increases in interest rates. The greatest deceleration of month-to-month price growth was found in the single-family segment when compared to townhome and apartment property types.


When it comes to buyers moving out of cities and into other areas, largely thanks to the freedom of remote working, Cathcart believes this trend will continue for some time after the pandemic, but not at its current rate. It will take time for companies and individuals to settle into the post-pandemic world, which will result in some continued movement in and out of cities in the meantime.


“Housing is typically a long-term thing you would plan for, but there’s not a lot of certainty about what a post-COVID world is going to look like yet,” explained Cathcart.


For urban buyers who may have traded in their single-family home and relocated to a more affordable place in the country, Cathcart predicts some people may purchase a smaller condo near their city workplace as a go-between.


“There have been lots of questions about whether this urban exodus will continue or reverse itself, but it’s more complicated. Maybe you buy that retirement place up in cottage country, but you also get yourself a condo in Toronto and that’s your pied-à-terre to go back into the office when you do have to do it,” he said. “Maybe your place of employment moves away or closer to you, or maybe you decide to take a new job closer to your new home, or one that is entirely remote work? There are a lot of moving parts to this.”


If you’re looking to upgrade to a larger property, or want more insight on COVID-19 trends in your local market, consult the advice of a qualified REALTOR® for the most up-to-date insights. 



Source: https://www.realtor.ca/blog/will-the-desire-for-larger-homes-be-a-permanent-change/20950/1361

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For many Canadians, a home represents a secure, stable asset and an investment in their future.


Despite the challenges with housing affordability across the country, research shows homeownership can play a significant role in reducing inequality—with benefits that extend across income levels, ages and regions.


Lower-income Canadians benefit most from owning a home

This isn’t limited to high-income households—in fact, it’s more significant for lower-income households, according to data laid out in our recently released white paper, The Homeownership Dividend for Canadians. For many lower-income households, a principal residence may be their only source of wealth, which means the benefits are even more pronounced.



“Home is way more than just a house—home is a feeling, home is a sense of belonging,” says Stevenson. “There are financial benefits to owning a home, but when we’re talking about reducing inequality through homeownership, it’s significant. Regardless of what price point you enter the market, you benefit from market appreciation, from having an asset that helps you with access to financial vehicles.”


For the 8.5 million Canadian households with incomes below $56,495, housing represents nearly half of their total net worth. That’s why homeownership for low- and middle-income families is key to reducing inequality across the country, particularly for new Canadians and millennials, according to the white paper.


A 2018 study by Mortgage Professionals Canada (which draws on data from the LeForge House Price Survey and Statistics Canada’s Household Spending) shows the financial advantages of homeownership not only compare positively with other housing options, but are even greater for lower-income households. These findings also held for non-home assets, reflecting a greater propensity to save and invest among homeowners.


“We talk often about the high price of the average Canadian home, but with lower priced homes and markets, there’s still an equality benefit of getting into the housing market. We’ve seen appreciation increase over the years,” says Stevenson. Even for first-time home buyers who get into the housing market at a much lower price point, he says, they still receive that equality benefit.


Homes are an asset that increase net worth

Principal residences account for more than a third of the total value of Canadian assets, according to Statistics Canada’s 2019 Canadian Survey of Financial Security. For families who own their home, the value of their home doubled (on average) from 1999 to 2019. And as the value increases, we’ve seen a proportionate increase in median family net worth across the country.


“There’s a lot of financial benefits,” says Lisa Patel, President of the Toronto Regional Real Estate Board and a member of CREA’s Federal Affairs Committee. “It’s a stable asset class and it can offer a straightforward way to build your wealth and save for retirement.”


While homeowners may be tied to a mortgage, they’re also tied to an asset class—one that continues to increase in value. “You’re building wealth for your family, your kids, your grandkids, so there are many different financial gains,” says Patel. “It’s a sound long-term investment versus the stock market.”


For example, in 2015 Habitat for Humanity—a non-profit organization that helps local communities address a variety of housing needs and provides support for affordable housing around the world—surveyed 402 households with a habitat home in the U.S. state of Minnesota. More than half of respondents reported having more money after moving into a habitat home, with a 20% reduction in the use of government assistance.


And a 2013 study of an American-based prime mortgage program—a collaboration between researchers from one Korean and two American universities—found if respondents maintained homeownership for at least three years, low- and middle-income homeowners experienced a greater increase in net worth, including non-housing assets, than renters. The results held up even during the 2008-09 recession.


All age groups reap the benefits

These financial benefits also extend across age groups, from young first-time home buyers to pensioners living out their retirement. Statistics Canada’s 2019 Canadian Survey of Financial Security, for example, shows a significant financial advantage from homeownership across age groups.


“If you purchase a home and you keep it for your entire amortization period, at the end of the day it’s paid off,” says Jill Oudil, CREA’s Chair-Elect. “That assists you not just during the time you own the home, but in your retirement years.” That’s becoming even more important as people tend to live longer compared to previous generations.


But as they build equity, they also have the freedom to upgrade, such as moving from a condo to a semi-detached house. Or, in retirement, they could trade across rather than up, moving to a larger countryside home without incurring debt.


“The younger you can get started, the better,” says Oudil. “If you need a roommate, get a roommate.” That might not be your goal or preference, she says, but it helps people get in the market. Or, a family might buy a home, live in the basement for a few years and rent out the main floor to start building wealth.


“For a lower-income household it raises the level of investments they have, and it will grow their long-term equity,” says Oudil. That in turn, promotes a sense of purpose and fulfillment, which has a positive impact on their families and their communities.


Research backs homeownership as a policy goal

But homeownership isn’t a panacea. There’s no guarantee of financial security and it’s not necessarily the right answer (or the only answer) for every Canadian. But research from Canada and around the world shows the financial benefits of homeownership can be significant—regardless of income, age and geography.


Indeed, the financial dividend “is a crucial part of why governments have historically supported homeownership,” as we noted in the white paper, “and why it would be a mistake to abandon it as a policy goal.”


Homeownership continues to be the single largest source of wealth in Canada, providing net worth and financial security for millions of low- and middle-income households. So, while there’s still much debate on how to best provide access to homeownership opportunities for all Canadians, the research points to why this is so critically important.


Lower-income Canadians benefit most from owning a home
This isn’t limited to high-income households—in fact, it’s more significant for lower-income households, according to data laid out in our recently released white paper, The Homeownership Dividend for Canadians. For many lower-income households, a principal residence may be their only source of wealth, which means the benefits are even more pronounced.
 
“Home is way more than just a house—home is a feeling, home is a sense of belonging,” says Stevenson. “There are financial benefits to owning a home, but when we’re talking about reducing inequality through homeownership, it’s significant. Regardless of what price point you enter the market, you benefit from market appreciation, from having an asset that helps you with access to financial vehicles.”
 
For the 8.5 million Canadian households with incomes below $56,495, housing represents nearly half of their total net worth. That’s why homeownership for low- and middle-income families is key to reducing inequality across the country, particularly for new Canadians and millennials, according to the white paper.
 
A 2018 study by Mortgage Professionals Canada (which draws on data from the LeForge House Price Survey and Statistics Canada’s Household Spending) shows the financial advantages of homeownership not only compare positively with other housing options, but are even greater for lower-income households. These findings also held for non-home assets, reflecting a greater propensity to save and invest among homeowners.
 
“We talk often about the high price of the average Canadian home, but with lower priced homes and markets, there’s still an equality benefit of getting into the housing market. We’ve seen appreciation increase over the years,” says Stevenson. Even for first-time home buyers who get into the housing market at a much lower price point, he says, they still receive that equality benefit.
 

Source: https://www.realtor.ca/blog/how-homeownership-can-reduce-inequality/20686/1362
https://www.realtor.ca/blog/how-homeownership-can-reduce-inequality/20686/1362
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